The Dow Jones is down nearly 400 points, with consumer-staple giant Johnson & Johnson responsible for nearly a quarter of this plunge…
… as JnJ is suffering its worst drop since 2002…
… with the company wiping out as much as 11% of its value, or some $35BN in market cap…
… following a “powder keg” Reuters report that from at least 1971 to the early 2000s, Johnson & Johnson knew that asbestos lurked in its Baby Powder, and that its talc product “sometimes tested positive for small amounts of asbestos”, and that company executives, mine managers, scientists, doctors and lawyers were aware of the deadly threat, and “fretted over the problem and how to address it while failing to disclose it to regulators or the public.”
Curiously, the last time shares of the drugmaker came under this much pressure was due to asbestos concerns back in February, after traders circulated a blog post focused on worries about what might be uncovered during litigation Bloomberg reports. The shares fell as much as 11% that day, even as Wells Fargo – who else – called the concerns overblown. Analyst Lawrence Biegelsen said at the time that approximately 5,500 talc cases nationwide could create a total liability to the drugmaker of just $1.5 billion.
Fast forward to today when as noted above, the intraday move has wiped out $35 billion in market value, although as Susquehanna litigation analyst Tom Claps said “today’s Reuters story about JNJ’s talc litigation is not ‘new news.'” In July, a jury ordered the company to pay $4.69 billion to women who claimed asbestos in the products caused them to develop ovarian cancer
“JNJ has been facing talc/asbestos litigation for years,” Claps wrote in response to questions. He said there have been a number of trials where plaintiffs showed evidence suggesting the company knew and concealed the risks. “Interestingly,” he said, “JNJ’s stock has taken a bigger hit today than it did after that $4.7B verdict.”
And while it is debatable if the company’s talc problems are “news”, Bloomberg Intelligence litigation analysts Aude Gerspacher and Holly Froum estimate that the New Brunswick, NJ-based company could be on the hook for as much as $10 billion to $20 billion in settlements from an estimated 11,000 pending talc cases.
For now the market is even more skeptical and is hitting the AAA/Aaa rated company (a rating higher than that of the US itself) to nearly double that potential payout and resulting in broad pain for the Dow Jones as well.